Germany's opposition Christian Democrats struggled to maintain a show of unity yesterday - but there was no disguising the poisonous atmosphere engulfing the party as renewed bitterness followed reports that former Chancellor Helmut Kohl is backing a challenge to the leadership of his successor, Wolfgang Schäuble.

The liberal Süddeutsche Zeitung newspaper claims that Kohl, angered by Schäuble's efforts to distance himself from the scandal surrounding secret payments to the party, is encouraging a former Cabinet Minister, Jürgen Rüttgers, to make a bid for the leadership at the CDU's annual conference in April.

Rüttgers - the party's candidate in a crucial state election in North Rhine-Wesphalia in May - is one of the few leading figures who has remained loyal to the former Chancellor since prosecutors began a criminal investigation into Kohl's financial dealings last week. Kohl has admitted accepting up to DM2 million in anonymous cash donations and channelling the money through secret accounts to local party organisations. The former Chancellor's supporters are outraged at Schäuble's increasingly strident demands that Kohl should identify the donors to dispel suspicion that donations influenced government policy during his 16 years in power.

Kohl is understood to have told friends he believes Rüttgers would be a better party leader than Schäuble. The Süddeutsche Zeitung quotes him saying: 'My troops are ready.'

A leadership challenge could be backed by party organisations in four states where local leadership has criticised Schäuble's handling of the crisis. With one third of the delegates at the party conference coming from Rüttgers' home state of North-Rhine Westphalia, the challenger would have a good chance of winning a majority.

Kohl and Rüttgers yesterday dismissed talk of a challenge as 'a pure invention', but as the CDU leadership ended a two-day strategy meeting near Hamburg the mood within the party was grim.

Before the meeting began, Schäuble delivered his sharpest criticism of the former Chancellor to date: 'The Kohl era ended when he lost the election in 1998 and quit as party chairman. Obviously we cannot take responsibility for things that happened before that we did not know about. There is no alternative to explaining as fully as possible breaches of the party funding law that Helmut Kohl has himself admitted and taking the appropriate consequences. No matter how bitter that path is, it is and remains the only option,' Schäuble said.

In a humiliating snub to Kohl, CDU activists in the northern state of Schleswig-Holstein have told him to stay away during the campaign leading up to next month's state election. The party's chances of defeating the governing coalition of Social Democrats (SPD) and Greens in the state have diminished as the scandal over party funding has damaged the standing of the CDU. 'Kohl's presence would not be helpful,' said Johann Wadephul, the CDU's campaign manager.

Rüttgers, on the other hand, made an elaborate display of loyalty to his old boss last week when he rounded angrily on party colleagues who called on Kohl to give up his parliamentary seat while the investigation continues. Many CDU activists, regardless of their feelings towards Kohl, regard Rüttgers as having a better chance than Schäuble of defeating Chancellor Gerhard Schröder at the next federal election in 2002.

Opinion polls show Schröder's popularity has soared since the scandal broke and his Social Democrats are now 3 per cent ahead of the Christian Democrats. And as speculation rages about a possible leadership contest, new allegations emerged about the source of Kohl's secret donations. The weekly magazine Focus claimed a Munich construction magnate gave the former Chancellor 'a six-figure sum' in cash during the early 1990s. The magazine quoted a friend as saying that the businessman, who died in 1995, was 'quite astonished' when he discovered Kohl did not lodge the money in the CDU's official accounts.

'I have no intention of making any comment on that,' Kohl said through a spokesman.